So I've got an interesting possibility. I had the landlord next to my rental in Lexington, KY recently contact me about helping pay for cutting down some tree limbs that were from my trees that were onto her property. I at first wanted to just tell her go ahead and cut them down if you want but I didn't want to help pay, but for some reason it just didn't feel right, so I told her I would help pay.
Anyways come to find out after talking with her, she is an older lady that has own 6+ rentals. She has owned them for a while and told me that eventually she would sell them because she did not think her kids would take them over. Her only big issue is she is worried about the amount it would cost her in taxes.
So I got to thinking that there must be a way to creatively finance a deal with her that spreads out the costs she might incur with taxes. I thought that maybe if she would be open to owner financing that she would at least be getting monthly payments and interests that could spread out her cash-flow as to not have a lump sum gain all at once?
What do yo all think?
If talk to her about owner financing. Installment sale. If she sells them to you that way not only will she make more over time she'll only pay taxes on the income as she receives it.
The installment sale spreads out her cap gain taxes but her depreciation recapture tax is All taxable in the year of the sale. She’ll likely want enough down payment to cover that. This could be significant if she has owned them for a long time.
If she creates a land trust, places the property into the name of the trust, sells the property to you, then places the funds in a bank account in the name of the trust I believe she can defer the capital gains tax. She'll incur a cost to set up the land trust (recommend using a real estate attorney well versed in this process) and most likely will have to pay a transfer tax to transfer the property from her name into a trust depending on what state the property resides. Check out this site for more info...
DISCLAIMER: I'm not an attorney or an accountant so please verify the aforementioned post with a professional.